Wednesday, August 24, 2005, 8:03:00 PM EST
Gold and Dollar Market Summary
Author: Jim Sinclair
Dear CIGA:
COT is directly exposed in harm’s way. Stop for a moment and think of what COT and its Trojan horses have accomplished. COT builds a short position by selling into strength and reaches a certain point where the gold market must decline. At that juncture, COT starts an operation of quick, hard, well-timed selling sorties into the marketplace - not to sell volume but rather to affect the price of gold lower.
Bulls hold back as you start to vibrate with fear. Clearly this impacts the momentum indicators which have been strong to sideways up until now. As the various momentum indicators decelerate, the traders with an inclination to be bearish begin to sell.
COT therefore collects simply by selling to a level of 50,000 contracts and by that simple act you deliver to them huge profits. Having set in place communication lines resulting in a PR spin of infallibility, it is you that contributes to COT's pretense of infallibility.
What COT has lucked out on so far is dollar weakness or sideways motion cooperation. However, there is no guarantee that this dollar cooperation is set in cement. The dollar market size has doubled over the past 18 months from one to $2 trillion per day. Now that is one humungous market to try and influence in any direction except the direction it wants to go.
The language of all markets is simple if you will only allow it to be. You do not want to be a master technician because I am not so sure these masters are anything more the self-fulfilling prophets. Trend lines, trend channels determined by parallels, formations, Fibonacci, plus self control are all you need as aggressive investors.
The US dollar has formed two bearish Head and Shoulders formations, breaking down from number one, pulled back to the neck line and fallen away. That is not a bullish event, most certainly when the initial break is exactly the formation that put in the major top on the US dollar.
Today’s action on the US dollar looks down right LOUSY. Up in the morning, then down she went, looking like a dead cat getting air time.
The dollar will either support or reject the choreographed gold downside COT reaction that you believe must occur just because COT is up to its eyeballs one more time in positions short of gold. How so many have fallen for this bull is mind boggling but they have and therefore it is a real threat.
Do not for a moment discount the existence of Trojan horses camouflaged as long term gold bulls and "trade everything all the time" gold advisors. Many of these low life characters would sell their mothers into slavery for a few bucks.